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FAQ

Forex trading (also commonly known as Foreign Exchange, currency or FX trading) is a global market for trading one country’s currency in exchange for another country's currency. It serves as the backbone of international trade and investment: imports and exports of goods and services; financial transactions by governments, economic institutions or individuals; global tourism and travel – all these require the use of capital in the form of swapping one currency for a certain amount of another currency.

When trading Forex CFDs, you are essentially speculating on the price changes in their exchange rate. For example, in the EUR/USD pair the value of one Euro (EUR) is determined in comparison to the US dollar (USD), and in the GBP/JPY pair the value of one British pound sterling (GBP) is quoted against the Japanese yen (JPY).

If you think the exchange rate will rise you can open a ‘Buy’ position. Conversely, if you think the exchange rate will fall you can open a ‘Sell’ position.

Forex rates are impacted by an array of political and economic factors relating to the difference in value of a currency or economic region in comparison to another country's currency, such as the US dollar (USD) versus the Offshore Chinese yuan (CNH) – these are the currencies of the two largest economies in the world.

Among the factors that might influence Forex rates are the terms of trade, political relations and overall economic performance between the two countries or economic regions. This also includes their economic stability (for example GDP growth rate), interest and inflation rates, production of goods and services, and balance of payments.

To learn more, use our Economic Calendar to find real-time data on a wide range of events and releases that affect the Forex market.

Foreign Exchange trading has a number of risks that you should be aware of before opening a position. These include:

Risks related to leverage – in volatile market conditions, leveraged trading can result in greater losses (as well as greater capital gains).

Risks related to the issuing country – the political and economic stability of a country can affect its currency strength. In general, currencies from major economies have greater liquidity and generally lower volatility than those of developing countries.

Risks related to interest rates – countries’ interest rate policy has a major effect on their exchange rates. When a country raises or lowers interest rates, its currency will usually rise or fall as a result.